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How to price beverages for your event.

I found this very helpful article on how to price beverage service for your next event on www.meetingsnet.com. Enjoy!

A Beverage Pricing Primer

Dec 1, 2008 12:00 PM, Patti J. Shock

Highlights

Here’s a breakdown of methods of charging for alcoholic beverage service at events.

Charge per drink. Cash bars typically charge per drink, with a price high enough to cover other expenses. The facility either tallies the per-drink charge and presents a single check to the function host, or guests pay individually by the drink. Either way, you negotiate the prices in advance.

When setting prices, facilities ensure that the cost is a standard percentage of the total beverage sales so the house is guaranteed a certain profit margin. For example, mixed-drink prices usually are based on a beverage cost percentage of 12 percent to 18 percent of the total sales; wines and beers usually are priced to yield a beverage cost percentage of 25 percent.

Some facilities will waive bartender charges if the beverage sales reach a predetermined dollar amount. A meeting planner may negotiate to have the facility waive corkage fees (charge to open the bottles).

The price-per-drink method can also be used for open bars. Bartenders can track all drinks served by ringing up each one on a pre-check machine. At the end of the event, the count is computed, and the number of drinks consumed is multiplied by the agreed-upon price per drink, adding the consumption taxes and gratuities for the final accounting.

Charge per bottle

An inventory of all liquor is made at the beginning and end of the beverage function to determine liquor use. Most facilities will charge the client for each opened bottle, whether empty or not. In a hotel, the remaining liquor can be sent to the host’s suite or to a hospitality suite. Or, if the client has booked several catering events during a convention, leftover opened liquor can be used at the next function.

You may save a bit of money using this pricing method. For example, if a liter of gin yields 27 one-and-a-quarter ounce drinks at a price of $5 each, the expected revenue is $135 per liter. Generally the per-bottle charge in this situation will be a little less.

Charge per person

This pricing option usually is available to clients who want to offer an open bar. Since the open bar reduces the facility’s control over liquor consumption, the price per person usually is set fairly high to ensure profitability. The amount charged per guest may also include a charge for food and beverage. The client’s final billing usually is based on the type and amount of foods and liquors desired and the amount of time the bar must remain open.

Charge per hour

The major difference between per-person pricing and this method is a sliding scale of charges. For instance, for 150 guests, a client may have to pay $2,500 for the first hour of standard bar service and $2,000 for the second hour. Since most guest consumption usually takes place in the first hour, the caterer can offer a lower price for the second hour and still earn a fair profit. When using this pricing procedure, you must have a guaranteed minimum number of guests expected before you can receive a quote.

The per-hour pricing strategy may be combined with the per-person pricing method. You might pay $25 per person for the first hour, $20 per person for the second hour, and so forth.

Flat-rate charge

Similar to per-guest pricing, with this method you pay one bottom-line charge for the function. The flat-rate charge is usually based on the assumption that each guest will consume an average of two drinks during the first hour, and one drink per hour thereafter. The charge usually varies according to the number of guests expected and the amount of call and premium brands requested. The flat-rate charge is the easiest way to purchase a beverage function: No matter how many drinks guests consume, you know the price in advance. You do not have to worry about exceeding your budget. And there is no need to wait for a liquor inventory or drink audit.

Patti J. Shock, CPCE, is professor and director of distance learning, Tourism and Convention Administration Department, William F. Harrah College of Hotel Administration, University of Nevada, Las Vegas. Visit tca.unlv.edu/shock.html or send an e-mail to patti.shock@unlv.edu.